Sixth District Court of Appeal Addresses the Scope of Appraisal

In a June 9, 2023 decision, the Sixth District Court of Appeal (“DCA”)[1] explained the role of an umpire during the appraisal process. The First Acceptance Ins. Co., Inc. v. At Home Auto Glass, LLC a/a/o Petra James trial court had limited the scope of appraisal when it ruled that the term “amount of loss” in the insurance policy’s appraisal provision encompassed only the “extent of the physical damage” and not the “monetary value of repairs.” On appeal, the DCA outlined the scope of the appraisal process and the role of the appraisers and/or umpire. The court’s opinion is consistent with decisions issued by the First, Second, Third, Fourth, and Fifth District Courts, as well as the Florida Supreme Court. The decision affirmed that the scope of the appraisal process includes both an evaluation of the cause of the damages and a determination of the applicable repair or replacement costs for the damages.

It is undisputed that the ultimate determination of whether a claim is “covered” under a policy is a judicial question, not an issue for appraisal. See State Farm Fire & Cas. Co. v. Licea, 685 So. 2d 1285 (Fla. 1996); Midwest Mut. Ins. Co. v. Santiesteban, 287 So.2d 665 (Fla. 1974). Even though the issue of coverage remains a judicial question, the role of an umpire in the appraisal process is not limited to simply evaluating the scope of damages and replacing damaged items. The scope of the appraisal process includes all of the following: (1) determining the cause of any damages observed during inspection, (2) identifying the scope of damages caused by the reported cause of loss, (3) determining whether the damages caused by the reported cause of loss can be repaired or replacement is necessary, and (4) determining the cost associated with repairing or replacing the items damaged by the cause of loss.

In First Acceptance Ins. Co., Inc. v. At Home Auto Glass, LLC a/a/o Petra James, the appellee (“At Home”), prepared an invoice in the amount of $2,477.03 for the replacement of a broken windshield and submitted it to the insurer/appellant (“First Acceptance”). First Acceptance issued a payment to repair the windshield at the cost of $333.29. At Home filed a lawsuit, and First Acceptance filed a motion to compel appraisal. The relevant appraisal provision stated that the appraisers and/or umpire will be responsible for determining the “amount of loss.”  In response to the motion to compel appraisal, At Home argued that the term “amount of loss” referred only to the “extent of physical damage” and did not include repair costs. The trial court reasoned that the “extent of physical damage” was not in dispute because the parties agreed that the extent of the damage was limited to the windshield. Moreover, the trial court denied the motion to compel appraisal, holding that the term “loss” meant only actual damage; the appraisal process, therefore, did not include an evaluation of the monetary value of the repairs. First Acceptance appealed, and the DCA determined that the trial court’s interpretation of the appraisal provision was “unreasonable.”

In finding the trial court’s interpretation to be “unreasonable,” the court relied on the Florida Supreme Court’s decision in Johnson v. Nationwide Mutual Ins. Co., 828 So. 2d 1021 (Fla. 2002), which had adopted the Third DCA’s reasoning in Gonzalez v. State Farm Fire & Cas. Co.,805 So. 2d 814 (Fla. 3d DCA 2000). In Gonzalez, the Third DCA stated, “we interpret the appraisal clause to require an assessment of the amount of a loss. This necessarily includes determinations as to the cost of repair or replacement and whether or not the requirement for a repair or replacement was caused by a covered peril…” Gonzalez, 805 So. 2d at 816. After the Florida Supreme Court’s decision in Johnson, the First, Second, Fourth, and Fifth District Courts all issued opinions affirming that the scope of the appraisal process includes an evaluation of the cause of the damage and the monetary value of damages.

In State Farm Fla. Ins. Co. v. Sheppard, the court granted State Farm’s motion to compel appraisal and cited Johnson, stating that “causation…is an amount of loss question for the appraisal panel.” 268 So.3d 1006, 1007 (Fla. 1st DCA 2019). In Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., Cannon Ranch argued that the “method of repair” was a coverage issue and not subject to appraisal. The court disagreed and stated that “the question of what repairs are needed to restore a piece of covered property is a question relating to amount of loss and not coverage.” 162 So. 2d140, 143 (Fla. 2d DCA 2014). In Citizens Prop. Ins. Corp. v. River Manor Condo Ass’n., the parties disagreed on the scope of an appraisal award, and the court held that “appraisers determine the amount of the loss, which includes calculating the cost of repair or replacement of property damaged and ascertaining how much of the damage was caused by a covered peril as opposed to things such as normal wear and tear.” 125 So. 3d 846, 854 (Fla. 4thDCA 2013). More recently, in Mendota Ins. Co. v. At Home Auto Glass, LLC., At Home argued that the “policy defined ‘loss’ as ‘a sudden, direct and accidental loss of or physical damage to property’ and, therefore, the policy's appraisal provision only applied where there was a dispute as to the amount of physical damage.” 348 So. 3d 641, 643 (Fla. 5th DCA 2022). The court disagreed and held that “when an insurance policy contains an appraisal clause triggered by a dispute over the ‘amount of loss,’ appraisal ‘necessarily includes determinations of the cost of repair or replacement’.” Id.

Despite the case law cited above, First Acceptance Ins. Co., Inc. v. At Home Auto Glass, LLC a/a/o Petra James makes clear that some mistakenly believe the appraisal process to be limited to an evaluation of the scope of damages and determination of the cost to replace damaged items. Florida courts, however, have made it clear that the appraisal process is more extensive. Appraisers and/or umpires are responsible for (1) identifying and documenting the actual damages to the subject property, (2) evaluating the actual cause of the damages, which includes differentiating between damages caused by the reported cause of loss and damages caused by something else, like wear and tear, (3) determining whether the damaged property can be repaired or whether it must be replaced, and (4) determining the cost/price associated with repairing property that can be repaired and the cost/price associated with replacing property that must be replaced. In other words, the scope of appraisal includes both the extent of physical damage(causation) and the monetary value of the damages (repair/replacement costs).